Mortgage Rates
When shopping for a home mortgage, an optimal home loan rate should be the focus of a homeowner's inquiry. A wide variety of mortgage interest rates are available in the marketplace for prospective borrowers seeking to finance their homes. Since a slight bump in home rates from .125% to .20% could spell substantial savings for home buyers, it pays to research and compare current home loan rates. These vary from state to state and are determined by a number of factors. First, home mortgage rates depend on whether the borrower's objective is 1) debt consolidation, 2) a home purchase, 3) mortgage refinance 4) home equity or a second mortgage. Secondly, they differ depending on whether the home is a condo, townhome, single-family or multi-family. Thirdly, home rates hinge upon a borrower's credit status and history. They also change according to the mortgage program that is selected.
Home purchasers may compare current home loan rates from scores of mortgage companies and creditors in their area and nationwide. These rates are generally updated daily. Prospective borrowers may request free custom mortgage rate quotes (which include the interest rate, charges, and discount points) via email or online chat, by telephone or in person. Mortgage rates may be obtained on the internet by 1) entering the loan amount that is desired, 2) selecting the state, and 3) choosing whether it is for purchasing or refinancing purposes.
Because home rates fluctuate, many home buyers lock-in the interest rate offered at the time of application. This insulates consumers from an increase in the mortgage rate prior to final approval and ensures that they benefit from the initial lower rate. Some creditors offer either a float-down or a one-way lock. This means that borrowers are protected not only if there is an interest rate hike, but also if the rate dips- in which case they may avail themselves of the lower rate.
Some of the most common mortgage rates are as follows:
1. Adjustable rate mortgage (ARM)
The interest rate of this mortgage loan is regularly adjusted in accordance with several indexes. The adjustable, variable or floating rate, as it is often referred to, may also change throughout the term of the loan in conformity to a reference rate to which is added or from which is subtracted a fixed margin. In an ARM loan, the fluctuating home loan rate may cause borrowers' payments to change accordingly during the course of the loan. If the mortgage rate falls, home buyers reap an advantage; however, if it goes up, they stand to lose. Popular ARMs include the 5/1 and the 3/1.
2. Interest-only loan
With this type of home loan, which is for a fixed term, home purchasers pay solely the interest on the principal, the latter remaining the same. The mortgage rate on an interest-only loan is usually slightly higher than for other loan products due to the fact that it poses a somewhat elevated risk for creditors.
3. Fixed-rate mortgage (FRM)
This mortgage loan offers borrowers a steady interest rate and consequently uniform payment for the term of the loan. A fixed mortgage rate provides homeowners increased security and immunity against market changes. It also facilitates their budgeting tasks and is much simpler to understand than adjustable rate products. Conforming loans, or mortgages that are under or equal to $417,000 ($625,000 in Hawaii and Arkansas) carry fixed home rates. Borrowers may choose from a variety of conventional or conforming fixed rate loans, including the following:
- 1-year fixed rate
- 5-year fixed rate
- 10-year fixed rate
- 15-year fixed rate
- 20-year fixed rate
- 30-year fixed rate
- 40-year fixed rate
- 50-year fixed rate
4. Jumbo Loans
A jumbo loan is a mortgage product with a fixed home loan rate and loan amounts that are greater than $417,000 ($625,500 in Hawaii and Arkansas), thus exceeding Freddie Mac's and Fannie Mae's limits. Also known as non-conforming loans, jumbo loans usually post higher mortgage rates. Examples of jumbo loans include the 30-year and 15-year jumbo fixed.
5. Federal Housing Administration (FHA) mortgage
This loan is insured by the Federal Housing Administration (FHA) and is typically referred to as a government loan. Home buyers with less than stellar credit qualify for FHA loans, which extend competitive home mortgage rates.
6. Refinance mortgage rate
Borrowers who refinance their mortgage benefit from home rates that are significantly lower than their original loan. The low refinance mortgage interest rate bestows substantial savings upon consumers by enabling them to save money for expenditures such as an auto purchase, home renovations, college tuition, and summer vacations. To compare rates, homeowners may utilize one of numerous online refinance calculators.